Some medical manufacturers might be surprised to see an invoice from the U.S. Food and Drug Administration this month.

The FDA Safety and Innovation Act that President Obama signed into law this summer, includes new fees and payment procedures for medical device manufacturers for fiscal year 2013, which began Oct. 1.

"The fee was a shock to us," Joyce McCrary from St. Petersburg, Fla.-based Choice Medical Systems Inc. told DOTmed News.

Choice Medical buys and sells new and pre-owned ultrasound equipment. Its main market is in the U.S. and according to McCrary, because there are a couple of products, like probes, that they bring in from overseas, they are required to register every year with the FDA.

But until now, they have never been asked to pay a registration fee.

One of the key amendments in the law is the expanded definition of the types of manufacturers that must pay a registration fee. In the new law, all registered medical device manufacturers are required to submit an annual fee of $2,575. Small companies, like Choice Medical, that haven't paid such fees in the past, are worried about how it could affect their business.

"We're not a GE. It's going to impact us as a smaller player," said McCrary.

Understanding the law

Device user fees for both registration and submissions are not new. The Medical Device User Fee and Modernization Act of 2002 established the fees, and they were revised in the 2012 Medical Device User Fee Amendments, or MDUFA III, which is part of the FDA Safety and Innovation Act.

Medical Imaging and Technology Alliance (MITA), an OEM lobby that worked closely with the FDA and other industry partners, like AdvaMed, to negotiate the reauthorization of the user fees with Congress, agreed as a whole that the vast majority of facilities that are registered with the FDA should be required to pay a fee.

"Before it was only a subset that was paying, and now it's larger amount of that group because there are costs associated with the FDA monitoring and running that program," said Brian Connell, director government relations at MITA. "So the general thought is that all establishments should be subject to that fee."

The bill gives the FDA the power to collect user fees that will total approximately $595 million (plus some adjustments for inflation) over the next five years. The additional funding will help offset the costs to the FDA for application reviews and inspections. Specifically, the added revenue will go toward hiring more than 200 full-time equivalent employees, according to FDA literature.

Connell said registration establishment fee exemptions have never been provided wholesale to individual companies. "Lack of clarity in previous agreements had led certain types of establishments to operate without paying establishment fees in the past," he said. He gave the examples of distributors and electronic medical records companies.

These types of establishments have been explicitly incorporated into the fee-paying system under MDUFA III, according to Connell. In addition, the new law says that are no exemptions: "There are no waivers or fee reductions for small businesses. Starting in fiscal 2013, all establishments must pay registration fees, regardless of establishment type or activities conducted," said an official statement from the FDA.

An FDA spokesperson confirmed this with DOTmed News.

Besides the new registration fees, there are increased fees for device companies applying for 510k submissions, premarket approval (PMA) and other types of procedures. These types of fees have increased through the years, and will continue to escalate for fiscal 2013. For example, in fiscal 2012, the standard fee for a 510k submission was $4,000, or 2,000 for a small business fee ($100 million or less in gross receipts or sales). For fiscal 2013, it's 4,960 for a standard fee and 2,480 for small business.

"Fees are going up on all parts of it. That's a big cost for the industry, but a fully functioning FDA is worth a lot to the industry," said Connell.

The trend of fees going up worries McCrary.

"It bothers me that this is the beginning of something that will become bigger and my worry is it will drown out the people such as small businesses with the fees," she said.

According to James O'Reilly, a professor at University of Cincinnati College of Law and chairman of the FDA committee of the American Bar Association, the new fees could certainly have an impact on small and mid-sized medical device companies.

"It will impact their willingness to bring on an additional invention or additional new or novel device," he said.

Other provision in the law to plan for

O'Reilly told DOTmed News that FDA inspections will be more high-risk under the new law, and that companies should be prepared for this.

"It's especially high-risk for those who have multinational supply chains because the component plants outside the U.S. operate in a different culture relating to their government inspectors," he said.

For instance, if an FDA inspector shows up unannounced in a country outside of the U.S. and the people in that plant are not trained to respond appropriately to the inspector causing them to be turned away, the company could risk having a delay or refusal from the inspector that would result in a barrier of the foreign components into the U.S.

"We advise [companies] to be careful about training their non-U.S. facility managers so that the inspectors are not feeling that they have been rejected--this could prevent the shipped good already in transit from being admitted into the U.S." said O'Reilly.

According to the Regulatory Affairs Professionals Society, the new law is already driving companies to hire more compliance and quality staff members with experience dealing with the FDA.

"The specific reason is that the change in inspections makes it far more high-risk than it's ever been before," said O'Reilly.

Extended deadline

The annual registration fee of $2,575 that all companies must now pay has been extended by one month until January, according to the FDA. The annual registration must now be paid before January 31, 2013, instead of December 31, 2013.

Connelly thinks the reason might be because of the short window for implementation. The legislation was approved in July and took effect Oct. 1.